Friday, March 20, 2009

Dealing With Dirt

Since I work with dirt quite a bit in developing commercial land and buildings I have learned a few things about it. Here are the major lessons learned in dealing with dirt, excavation and site work:

1. Try to get your dump, fill or storage sites as close to where the dirt is coming from in the first place. It will save you money on the hauling.
2. Include all the seeding and stabilization work in the originial contract with your site contract.
3. Be sure the RLD (Responsible Land Disturber) is the site contractor and not you.
4. Retain at least 5% until the erosion and sediment permit is closed by the governing body.
5. When dealing with rock, it is always better to blast it than to hammer it since you generally do the hammering at an hourly rate. If you can get the rock removed based upon the cubic yards for a flat price, take that. In my area it is typically $60 for mass rock.
6. Watch how much top soil is put down in the finish grading. I have been ripped off by contractors who put only 1-2" down when the plans called for 6". You need at least 6" to grow grass in all seasons.
7. Finally, sell your excess fill dirt. Don't just give it away. Clean, compactable fill is hard to come by. You should be able to recoup those costs.

Monday, March 16, 2009

A Cash Flow How To For The Entreprenuer

Okay, this year the economy sucks. Yes, we all know it by now. However, for the entreprenuer, it is especially dangerous. The worst thing a small business can do is file for bankruptsy. Of course, you can only go bankrupt if you don't have enough money to pay your debts. The secret is cash flow.

I use a simple process that helps me see where the cash is coming from and going to. For a small business, cash truly is king. Here is how it works:

1. I create a spreadsheet showing all the months across the top row.
2. Then down the side I list all the sources and uses of cash. For instance, free cash flow from RentQuick is listed by each month. If the cash flow is income it is listed as a positive. If the cash flow is an expeniture, then it is listed as a negative. Other items are estimate tax payments, personal use payment, property tax, investments, insurance payments, etc. I list the net cash flow for each business I have. So a startup might be negative and a cash cow might be positive.
3. I then add up all the sources and uses by the month. The resulting spreadsheet shows when I need money and by how much.

Pretty simple.

Saturday, March 14, 2009

It is time to get to work

Over the past six months, I have been holding back like most people. I started to believe that the commercial real estate market was dead so I didn't try anymore. No longer! Come Monday morning, I am going full bear on finding buyers, builders and tenants. I am not going to wait until everyone is on board with the economy. I will start calling everyone in my prospect list to get a deal going.

Everyone gets into a slump. I think I have been allowing too much of the negative market data to hold me back. I am going to get to work on Monday and make something happen. If there is nothing out there, then at least I will know for sure.

Anyone who is ready to do a deal in the Waynesboro area should get in touch with me asap. The rest of the world can sit by while I make something happen.

visit for my contact info.

Thursday, March 05, 2009

Where does real wealth come from?

As we are all in a world of crap because of the financial meltdown, I thought it would be relevant to discuss where wealth actually comes from. Over the past decade and a half, it seems that people believed that wealth was created by speculating (they called it investing) in the stock market. In 1997, had you invested $1,000 in a basket of DOW Industrial stocks, you would have lost about 30% after adjusting for inflation.

Where is the wealth? It is gone, but it never really existed in the first place.

Real wealth comes from real profits which are created by real value for a consumer. Buying stocks is not investing except in the rare instance where the company is on the other end of the transaction (IPO and stock offerings). So unless the company is getting the money you are paying for their stock, you are not investing.

What you are doing is buying something that someone else thinks is going to go down in value. Otherwise, why would they sell it?

You aren't investing. Instead, all that has occurred is that the owner has changed.

Wednesday, March 04, 2009

New Career Choices

Today, I snuck up to Wintergreen to get a morning of skiing in. While there, I met a great guy named Mark. Mark is about 65 and a retired executive. We rode the lifts between runs and struck up a conversation about the economic changes.

If you were born in 1944 like Mark, then you would have been entered the job market in the mid-60's. At that time, the best place to work was likely GE and IBM. These companies offered defined pension plans for employees who worked there for their entire careers. This is where the retirement parties included a gold watch. The contract between employee and company was straightforward: work here for your entire career and we will take care of you until you die.

My generation is a little different. I was born in 1968 and entered the Marines in 1986. Had I gone straight to college, I would have entered the career mode in 1990 or so. My generation figured out that the defined pension plans were a thing of the past. Big companies made matching contributions to a 401K which I could roll over to another if I were to leave. The implied contract was not for life. My generation was the "free agent" employee. They moved from job to job after anywhere from 2 to 4 years on the job.

Of course, the current market is messing that up for a number of people. If you are sitting on a 401K then you likely have seen the value drop in half over the past year. Companies are now stopping their contributions to 401k plans and if enough time passes, they might not restart them.

My kids are going to have a tougher time putting together a career than I did. I hope to guide them to see the big picture and make choices based upon what works best for them. However, we can agree that the safe old days are over and risk is shifted to the workers away from the companies.

Monday, March 02, 2009

Who pays analysts?

It seems there are plenty of analysts out there who are paid to make financial predictions. These guys go on CNBC or other shows and make their predictions with a completely straight face. However, if you look at their actual performance, their bosses might want their money back.

Here are a few of my favorites:

May 21, 2008 Arjun N. Murti, analyst at Goldman Sachs predicts oil to hit $200/barrel just before oil peaks at $147 then falls back to its current level of $40.23/barrel.

Jim Cramer predicts Bear Stearns is fine and healthy just before it goes completely under.

AIG (AIG) "could have huge gains in the second quarter." —Bijan Moazami, analyst, Friedman, Billings, Ramsey, May 9, 2008. AIG wound up losing $5 billion in that quarter and $25 billion in the next. It was taken over in September by the U.S. government, which will spend or lend $150 billion to keep it afloat.

So whats the point? Simple, just because someone makes a prediction, doesn't make it so. Most of these guys are making guesses. They don't know anymore than anyone else really. This isn't a complete insult to them since they know they are really frauds.

The big point is that you need to weigh all the advice, predictions and data then make as best a decision as you can. If you run your own business, focus on the little things and plan for the big things.

There are more at:

Sunday, March 01, 2009

If Obama Fails, Who Wins?

Lately, Rush Limbaugh has been called to the carpet over his line that he hopes Obama fails. Now, since that statement was made, Mr. Limbaugh has clarified this to mean that he hopes Obama's policies fail.

While this blog is not a place for political discussion, it is a place for explaining economics. It is important to look at the alternatives to the statement, "I hope Obama fails". (I call this "game theory light")

Alternative 1: Obama fails and the economy suddenly improves.
Alternative 2: Obama fails and the economy continues to slide.
Alternative 3: Obama succeeds and the economy improves.
Alternative 4: Obama succeeds and the economy fails.

Based upon these options, we are really only happy with #1 and #3. Obviously, we all want the economy to improve and for people to get back to work. I do have a problem with Alternative #4 because by the administration's metrics, success is gauged by job creation. So it doesn't make sense that Obama and his policies could succeed without the economy improving.

Now, let's look at it from the Republican point of view. Clearly, Limbaugh is interested in getting the GOP back into power. So here are the alternatives for the Republicans:

Alternative 1: Obama fails and the economy suddenly improves.--GOP Wins
Alternative 2: Obama fails and the economy continues to slide.--GOP Loses
Alternative 3: Obama succeeds and the economy improves. --GOP Loses
Alternative 4: Obama succeeds and the economy fails. --GOP Loses

This will take some explanation.

#1. If Obama fails and the economy improves, then the GOP would be the political winner.

#2 If Obama fails and the economy gets worse, then the GOP loses because they could only claim to have caused Obama to fail, but without an improved economy and no real plans other than for the government to stay out of it then the GOP will lose.

#3. Self explanatory

#4. This is similar to #2, but in this case the GOP may win politically and the country would lose economically. You could argue that the GOP would win here simply because Obama lost, but the human costs would be pretty high. This alternative is still flawed because Obama's success is tied to job creation.